Inflation Eases to 2.6%, but Underlying Pressures Remain Firmly in Place
Published / Last Updated on 22/07/2026
Inflation Summary
UK inflation fell to 2.6% in the year to June 2026, down from 2.8% in May, driven largely by a sharp drop in petrol and diesel prices. While this offers welcome short‑term relief, several core categories continue to rise at rates well above the Bank of England’s 2% target, signalling that inflationary pressures remain embedded across the economy.
Key Points
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CPI inflation: 2.6% (down from 2.8%)
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RPI inflation: 3.0% (down from 3.1%)
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Transport inflation: still elevated at 5.7%, despite cheaper fuel
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Services inflation: stubbornly high, with communication, education, and hospitality all above 4%
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Monthly CPI: +0.1% (vs +0.3% in June 2025)
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Goods inflation: 1.7%
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Services inflation: 3.6%
What’s Driving the Fall?
Lower fuel prices were the main contributor to June’s easing:
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Petrol and diesel prices fell for the first time since the outbreak of conflict in the Middle East.
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Clothing and footwear saw deeper seasonal discounting.
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Food inflation continued to cool, dropping to 1.7%.
However, these improvements mask persistent strength in service‑sector inflation, which tends to be more “sticky” and slower to fall.
Category Breakdown (12‑month CPI change)
| Category | May 26 | Jun 26 | Change |
| Transport | 6.8% | 5.7% | –1.1% |
| Clothing & footwear | 0.2% | –0.5% | –0.7% |
| Food & non‑alcoholic beverages | 2.2% | 1.7% | –0.5% |
| Alcohol & tobacco | 2.4% | 2.1% | –0.3% |
| CPI All items | 2.8% | 2.6% | –0.2% |
| Furniture & household goods | –0.1% | –0.2% | –0.1% |
| Education | 5.1% | 5.1% | 0.0% |
| Housing & household services | 1.2% | 1.2% | 0.0% |
| Communication | 5.1% | 5.2% | +0.1% |
| Health | 2.4% | 2.5% | +0.1% |
| Recreation & culture | 1.5% | 1.7% | +0.2% |
| Restaurants & hotels | 4.2% | 4.4% | +0.2% |
| Miscellaneous goods & services | 2.4% | 2.7% | +0.3% |
RPI: A More ‘Lived’ Measure of Inflation
RPI edged down to 3.0%, but remains significantly higher than CPI. Because RPI uses an arithmetic mean, many analysts consider it a closer reflection of real‑world household inflation. The slight fall may indicate early signs of renewed inflationary pressure building beneath the surface.
Bank of England Outlook
The Bank of England is widely expected to hold interest rates at its meeting on 30 July. Key considerations:
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The labour market continues to cool, reducing the risk of wage‑driven inflation.
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Energy‑driven inflation behaves differently from demand‑driven inflation, complicating policy decisions.
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July’s inflation reading may be less comfortable, with oil prices already rising again and the new energy price cap feeding into household bills.
Forward View: What to Expect
Inflation may rise again in July due to:
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Renewed tensions in the Strait of Hormuz, pushing oil prices higher
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The July energy price cap increase
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Persistent strength in services inflation
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Ongoing supply‑chain pressures in transport and logistics
While June’s figures offer short‑term relief, the broader picture remains volatile. Energy markets will be a key flashpoint over the coming months, and the Bank of England will need to balance falling headline inflation with stubborn underlying pressures.